Former Calif. Administrator Charged in Medicare Scam

December 29, 2004

The United States Attorney’s Office for the Northern District of California announced that a federal grand jury in San Jose has indicted Neil Philip McArthur on three counts of medicare fraud.

McArthur was charged with defrauding Medicare of more than $800,000 between Jan. 1, 1998 and Jan. 10, 2000. During this time, he was employed by the Monterey Family Practice Medical Center (MFP) and Alpha Healthcare Management Services (Alpha) in Monterey, California.

McArthur, 53, and formerly of Carmel, Calif., but now residing in San Francisco, is charged with 1) conspiracy to commit health care fraud, 2) health care fraud, and 3) making a false statement pertaining to health care fraud.

According to the indictment, which was returned on Dec. 1, 2004 and unsealed earlier this month after the defendant was arrested, McArthur used his position as the administrator for MFP to steal more than $800,000 from Medicare by routinely submitting false and fraudulent bills for medical services that: a) had not been rendered, b) had been “upcoded” to reflect a more expensive procedure than was actually performed, and c) were rendered by unlicenced or unqualified personnel.

According to the indictment, MFP, now defunct, was a California corporation consisting of a number of physicians practicing in the Monterey area. Alpha was a billing services company for MFP and other physicians’ groups. McArthur was employed by both MFP and Alpha, and handled the billing services for MFP on both ends.

McArthur allegedly took “superbills” (a pre-printed document used by doctors and nurses to reflect medical services performed, treatments ordered, and diagnoses rendered during a particular patient visit) turned in by MFP doctors and added services such as urinalyses, x-rays, and electrocardiograms. In other instances, McArthur allegedly “upcoded” services to reflect more expensive levels of service than those that were actually performed. Finally, McArthur allegedly billed services performed by a nurse as if they had been performed by a doctor.

McArthur was arrested outside his residence in San Francisco. He made his initial appearance before Chief Magistrate Judge Patricia Trumbull, who ordered him released on $100,000 bail.

The maximum statutory penalty for count one in violation of Title 18,U.S.C. § 371 and count three in violation of Title 18, U.S.C. § 1035 is five years imprisonment. The maximum penalty for count two in violation of Title 18, U.S.C. § 1347 is 10 years imprisonment. Each count carries a maximum penalty of the greater of $250,000 or twice the gain or loss from the offense, a three year term of supervised release following release from prison, and restitution. However, any sentence following conviction would be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and would be imposed in the discretion of the Court.

The prosecution is the result of a four-year investigation by agents from the Department of Health and Human Services, Office of Inspector General, the Federal Bureau of Investigation, and the Defense Criminal Investigative Service. The audit that led to the discovery of the fraud was conducted by the National Heritage Insurance Corporation.

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